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. Last Updated: 07/27/2016

A New Era for European Finance

FRANKFURT -- The European Monetary Institute, forerunner of a future European Central Bank, held its inaugural meeting in Frankfurt's historic city hall Tuesday, ushering in a new European financial era.


Its president, Alexandre Lamfalussy, made clear that the EMI was going to be very cost-conscious.


A major row broke out last year over extravagant expenditure by the European Bank for Reconstruction and Development, the agency promoting economic development in East Europe.


Lamfalussy also said that the EMI faced the hard task of fostering European monetary cooperation while decision-making remained firmly with individual central banks.


He said the EMI had a very clear separate mandate to prepare the ground for the creation of a central bank system. The EMI had to work out exactly what instruments the future central bank would use.


However, he was very positive about the progress made towards integrating European economies over the last five years and said developments on European currency markets in the last few months had been remarkable.


In an essentially symbolic first meeting in the city hall in Frankfurt -- the EMI has not yet found permanent offices -- the EMI dealt largely with organizational matters.


Lamfalussy said no decision had been made on a site for the EMI. He had looked at two office blocks. He was still receiving offers, which would be considered.


Frankfurt was chosen as the site for the EMI and a future central bank after a hotly contested battle between Germany's financial capital and London.


Some critics of the Frankfurt decision worried the EMI could come under excessive influence of the powerful German Bundesbank, but Lamfalussy made clear he would not permit this.


"I shall not accept a greater influence from the Bundesbank when we are here than if I had been sitting on top of a mountain somewhere else," he said.


Lamfalussy said it was unlikely that monetary union would be achieved by 1997 and he declined to speculate on whether there would be a common currency for some countries by 1999.


But he was confident a common currency would ultimately be created. "I believe there will be a common currency because we have reached a degree of real economic integration," he said.